On August 23, 2016, the Quebec and California Governments announced the results of the eighth Cap and
Trade System Joint Auction, held earlier this month. The results
show that only around 35% of the available greenhouse gas
allowances (credits) offered for sale were purchased. Many of the
credits that were sold in California were consigned by utilities,
meaning that revenues did not go to the Government. In total, the
Quebec and California Government proceeds from the auction were
much less than may have been expected.
This is the second consecutive auction where many credits have
gone unsold. As we discussed in an earlier
post, only around 10% of the credits offered for sale in May
2016 were sold. Once again, as discussed in commentary found here and here, it seems that factors such as
over-supply of credits already sold and uncertainty about the
future of the cap and trade program in California have contributed
to weak sales of credits in the August 2016 auction.
The weak sales in the recent Cap and Trade System Joint Auctions
may signal problems for the Quebec and California Governments, who
have planned to use the auction proceeds to fund a variety of
programs. Presumably, this is also a cause for concern in Ontario.
As we have previously
discussed, the Ontario Government plans to fund its Climate Change Action Plan with the proceeds
from the sale of credits (forecast at around $1.8 billion per
year). If those proceeds are lower than expected in 2017 (during
which year Ontario will have stand-alone auctions of credits) or in
2018 and beyond (during which time Ontario will be part of joint
auctions with Quebec and California), then it can be expected that
the scope of the programs under the Climate Change Action Plan will have to be
revisited and reduced.
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The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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